Chapter-1

INTRODUCTION

Accounting Standards are used as one of the main compulsory regulatory mechanisms for
preparation of general-purpose FINANCIAL reports and subsequent audit of the same, in almost
all countries of the world. Accounting standards are concerned with the system of measurement
and disclosure rules for preparation and presentation of financial statements. They appear with a
set of authoritative statements of how particular types of transactions, events and other costs
should be recognized and reported in the financial statements. Accounting standards are devised
to furnish useful information to different users of the financial statements, too such as
shareholders, creditors, lenders, management, investors, suppliers, competitors, researchers,
regulatory bodies and society at large and so on. In fact, such statements are designed and
prescribed so as to improve & benchmark the quality of financial reporting.

The rapid growth of international TRADE and internationalization of firms, the

Developments of new communication technologies, the emergence of international competitive
forces is perturbing the FINANCIAL environment to a great extent. Under this global business
scenario, the residents of the business community are in badly needed of a common accounting
language that should be spoken by all of them across the globe. A FINANCIAL reporting system
of global standard is a pre-requisite for attracting foreign as well as present and prospective
investors at home alike that should be achieved through harmonization of accounting standards.

Accounting Standards are the policy documents (authoritative statements of best accounting
practice) issued by recognized expert accountancy bodies relating to various aspects of
measurement, standards is to bring about uniformity in financial reporting and to ensure
consistency and comparability in the data published by enterprises.

1.2. NEED OF THE STUDY

The reasons for the different accounting practices may be:

a) Too many alternative accounting treatments in the accounting standards;

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b) Lack of harmony among government, standards setting body, and regulatory agencies;

* Adovption of different accounting stacfndards causes diffifculties in makfing relativfe

evaluatifon of perfofrmance of comfpanies. This phenomefgnon hinders the valuatgion and
congsequently the decisgion makigng prgocess.

* To overcome these proble0ms, har0monization of acc0ounting standa0rds has a0lready been

started. Accoun0ting harmonization is not an e0nd by itse0lf, but it is a means to an end. The
ult0imate objec0tive of harm0onizing accou0nting pr0actices amon0g countries is to fos0ter
in0ternational comp0arability of acco0unts.

* But still the harm0onization proc0ess has a lo0.ng way to go. Many stan.dard se.tting bo.dies
and regulato.rs of dif.ferent nat.ions are ar.dent pro.tectors of the.ir local stan.dards, th.ey are in
no .mo.od to allo.w thei.r job be.ing taken o.ver by a foreign entity.

* Thus wi.nning the consent of th.ese bodies is vi.tal for inte.rnational acc.ounting stan.dards to
do.n the ma.ntle of com.mon acc.ounting code, i.e. har.monization of common accou.nting
stan.dards, w.hich wi.ll m.ake impl.ementing count.ries m.ore comp.etitive internatio.nally.

* Acc.ounting stand.ards v.ary f.rom one cou.ntry to an.other. Th.ere are var.ious fac.tors that are
respo.nsible for this.

1.3. OBJECTIVES OF THE STUDY

The Project is presented with the following objectives:

1. To understand the various Accounting standards that exit as of now, and the governing bodies
of such accounting standards.

2. To understand the significance of harmonizing global accounting standards

3. To understand the issues in globalizing the accounting standards

4. To understand the standards followed by BSNL

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1.5. SCOPE OF ACCOUNTING STANDARDS:

These are supplementary to the laws of the land and do not substitute their provisions in any
manner.

i.e., Accounting Standards will be prepared in conformity with the provisions of the applicable
laws, customs usages and business environment in India.

1.6. RESEARCH METHODOLOGY

Research methodology is the process used to collect information and data for the
purpose of making business decisions. The methodology may include publication research,
interviews, surveys and other research techniques and could include both present and historical
information. Both primary and secondary data have been used to complete the study.

A. PRIMARY DATA:

Primary data is type of information that is obtained directly from first-hand sources by
means of surveys, observation or experimentation. It is data that has not been previously
published and is derived from a new original research study.

Sources of Primary Data:

Primary data was collected by a discussion with the company guide.

Data was collected through interaction with personnel who are working in Finance and
Accounting Departments of the organization.

SECONDARY DATA:
Secondary data is the data that has been already collected by and readily available from
other sources. Such data is cheaper and often quickly available than the primary data.

Sources of secondary data:

Reports and publication of government department.

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Newspaper

Company records and other documents.

1.6.LIMITATIONS OF STUDY:

Accounting standards seek to describe the accounting principles, the valuation techniques
and the methods of applying the accounting principles in the preparation and presentation of
financial statements so that they may give a true and fair view. By setting the accounting
standards the accountant has following benefits:

(i) Standards reduce to a reasonable extent or eliminate altogether confusing variations in the
accounting treatments used to prepare financial statements.

(ii) There are certain areas where important information are not statutorily required to be
disclosed. Standards may call for disclosure beyond that required by law.

(iii) The application of accounting standards would, to a limited extent, facilitate comparison of
financial statements of companies situated in different parts of the world and also of different
companies situated in the same country. However, it should be noted in this respect that
differences in the institutions, traditions and legal systems from one country to another give rise
to differences in accounting standards adopted in different countries.

(iv) BSNL is pan India company. So there are geographical limitations to the project. The project
is limited to study in NATFM of the annual financial statements provided by the company.

(v)The study does not compare the competitors of the BSNL. It is beyond the scope of project

(vi) The data is collected from the website of the company. Hence financial statements or annual
statements are representative of the whole company and not a circle or units

However, there are some limitations of setting of accounting standards:

(i) Alternative solutions to certain accounting problems may each have arguments to
recommend them. Therefore, the choice between different alternative accounting treatments may
become difficult.

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(ii) There may be a trend towards rigidity and away from flexibility in applying the accounting
standards.

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CHAPTER 2

REVIEW OF LITERATURE

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Chapter-2

REVIEW OF LITERATURE

ACCOUNTING STANDARDS:
Composition of the Accounting Standards Board

The composition of the ASB is broad-based with a view to ensuring participation of all
interest groups in the standard-setting process. These interest-groups include industry,
representatives of various departments of government and regulatory authorities, financial
institutions and academic and professional bodies. Industry is represented on the ASB by their
apex level associations, viz., Associated Chambers of Commerce & Industry (ASSOCHAM),
Confederation of Indian Industries (CII) and Federation of Indian Chambers of Commerce and
Industry (FICCI). As regards government departments and regulatory authorities, Reserve Bank
of India, Ministry of Company Affairs, Comptroller & Auditor General of India, Controller
General of Accounts and Central Board of Excise and Customs are represented on the ASB.
Besides these interest-groups, representatives of academic and professional institutions such as
Universities, Indian Institutes of Management, Institute of Cost and Works Accountants of India
and Institute of Company Secretaries of India are also represented on the ASB. Apart from these
interest groups, certain elected members of the Central Council of ICAI are also on the ASB.

Compliance with Accounting Standards

Accounting Standards issued by the ICAI have legal recognition through the Companies
Act, 1956, whereby every company is required to comply with the Accounting Standards and the
statutory auditors of every company are required to report whether the Accounting Standards
have been complied with or not. Also, the Insurance Regulatory and Development Authority
(IRDA) (Preparation of Financial Statements and Auditors Report of Insurance Companies).
Regulations, 2000 requires insurance companies to follow the Accounting Standards issued by
the ICAI. The Securities and Exchange Board of India (SEBI) and the Reserve Bank of India
also require compliance with the Accounting Standards issued by the ICAI from time to time.
 Identification of the broad areas by the ASB for formulating the Accounting Standards.

Constitution of the study groups by the ASB for preparing the preliminary drafts of the
proposed Accounting Standards.

Consideration of the preliminary draft prepared by the study group by the ASB and
revision, if any, of the draft on the basis of deliberations at the ASB.

Circulation of the draft, so revised, among the Council members of the ICAI and 12
specified outside bodies such as Standing Conference of Public Enterprises (SCOPE),
Indian Banks Association, Confederation of Indian Industry (CII), Securities and
Exchange Board of India (SEBI), Comptroller and Auditor General of India (C& AG),
and Department of Company Affairs, for comments.

Meeting with the representatives of specified outside bodies to ascertain their views on
the draft of the proposed Accounting Standard.

Finalization of the Exposure Draft of the proposed Accounting Standard on the basis of
comments received and discussion with the representatives of specified outside bodies.

Issuance of the Exposure Draft inviting public comments.

Consideration of the comments received on the Exposure Draft and finalization of the
draft

Accounting Standard by the ASB for submission to the Council of the ICAI for its consideration
and approval for issuance.

Consideration of the draft Accounting Standard by the Council of the Institute, and if
found necessary, modification of the draft in consultation with the ASB.

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The Accounting Standards as given by the ASB are listed below:

AS 1 Disclosure of Accounting Policies

AS 2 Valuation of Inventories

AS 3 Cash Flow Statements

AS 4 Contingencies and Events Occurring after the Balance Sheet Date

AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies

AS 6 Depreciation Accounting

AS 7 Construction Contracts

AS 8 Accounting for Research and Development (Withdrawn pursuant to AS 26 becoming

mandatory)

AS 9 Revenue Recognition

AS 10 Accounting for Fixed Assets

AS 11 The Effects of Changes in Foreign Exchange Rates

AS 12 Accounting for Government Grants AS 13

Accounting for Investments

AS 14 Accounting for Amalgamations

AS 15 Employee Benefits

AS 16 Borrowing Costs

AS 17 Segment Reporting

AS 18 Related Party Disclosures

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AS 19 Leases

AS 20 Earnings Per Share

AS 21 Consolidated Financial Statements

AS 22 Accounting for Taxes on Income

AS 23 Accounting for Investments in Associates in Consolidated Financial Statements

AS 24 Discontinuing Operations

AS 25 Interim Financial Reporting

AS 26 Intangible Assets

AS 27 Financial Reporting of Interests in Joint Ventures

AS 28 Impairment of Assets

AS 29 Provisions, Contingent Liabilities and Contingent Assets

AS 30 Financial Instruments: Recognition and Measurement

AS 31 Financial Instruments: Presentation AS 32 Financial

Instruments: Disclosures

An explanation pertaining to each Accounting Standard is given below:

AS1 Disclosure of Accounting Policies: (Issued in 1979 & Mandatory from 1st April,
1991)

a) All significant accounting policies adopted in the preparation and presentation of financial
statements should be disclosed.

b) The disclosure of the significant accounting policies as such should form part of the financial
statements and the significant accounting policies should normally be disclosed in one place.

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c) Any change in the accounting policies which has a material effect in the current period or
which is reasonably expected to have a material effect in later periods should be disclosed. In the
case of a change in accounting policies which has a material effect in the current period, the
amount by which any item in the financial statements is affected by such change should also be
disclosed to the extent ascertainable. Where such amount is not ascertainable, wholly or in part,
the fact should be indicated.

d) If the fundamental accounting assumptions, viz. Going Concern, Consistency and Accrual
are followed in financial statements, specific disclosure is not required. If a fundamental
accounting assumption is not followed, the fact should be disclosed.

AS 2 Valuation of Inventories (Originally Issued in June, 1981, Revised & Mandatory

st
from 1 April, 1999)

A primary issue in accounting for inventories is the determination of the value at which
inventories are carried in the financial statements until the related revenues are recognised. This
Statement deals with the determination of such value, including the ascertainment of cost of
inventories and any write-down thereof to net realizable value

Inventories are assets:

(a) held for sale in the ordinary course of business;

(b) in the process of production for such sale; or

(c) In the form of materials or supplies to be consumed in the production process or in the
rendering of services.
AS 3 Cash Flow Statements: (Issued June, 1981, Revised & Effective from 1st April, 1997
st
&Mandatory from 1 April, 2004)

Information about the cash flows of an enterprise is useful in providing users of

financial statements with a basis to assess the ability of the enterprise to generate cash and cash
equivalents and the needs of the enterprise to utilize those cash flows. The economic decisions
that are taken by users require an evaluation of the ability of an enterprise to generate cash and
cash equivalents and the timing and certainty of their generation. The Statement deals with the
provision of information about the historical changes in cash and cash equivalents of an
enterprise by means of a cash flow statement which classifies cash flows during the period from
operating, investing and financing activities.

An enterprise should prepare a cash flow statement and should present it for each period for
which financial statements are presented.

1. The cash flow statement should report cash flows during the periodclassified by
operating, investing and financing activities.

The following terms are used in this Statement with the meanings specified:

Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short
term, highly liquid investments that are readily convertible into known amounts of cash and
which are subject to an insignificant risk of changes in value. Cash flows are inflows and
outflows of cash and cash equivalents.
AS 4 Contingencies and Events Occurring after the Balance Sheet Date:
st
(Originally issued November, 1982 & Commencement & Effective 1 April, 1995)

The following terms are used in this Statement with the meanings specified:

a) A contingency is a condition or situation, the ultimate outcome of which, gain or loss, will be
known or determined only on the occurrence, or non-occurrence, of one or more uncertain future
events.

b) Events occurring after the balance sheet date are those significant events, both favorable and
unfavorable, that occur between the balance sheet date and the date on which the financial
statements are approved by the Board of Directors in the case of a company, and, by the
corresponding approving authority in the case of any other entity.

Contingencies

The amount of a contingent loss should be provided for by a charge in the statement of
profit and loss if:

(a) it is probable that future events will confirm that, after taking into account any related
probable recovery, an asset has been impaired or a liability has been incurred as at the balance
sheet date, and

(b) a reasonable estimate of the amount of the resulting loss can be made.

Events Occurring after the Balance Sheet Date

Assets and liabilities should be adjusted for events occurring after the balance sheet date
that provide additional evidence to assist the estimation of amounts relating to conditions
existing at the balance sheet date or that indicate that the fundamental accounting assumption of
going concern is not appropriate.

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AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes in
Accounting Policies (Originally issued November, 1982, Commencing & Mandatory from
st
1 April, 1996)

The objective of this Statement is to prescribe the classification and disclosure of certain
items in the statement of profit and loss so that all enterprises prepare and present such a
statement on a uniform basis. This enhances the comparability of the financial statements of an
enterprise over time and with the financial statements of other enterprises. Accordingly, this
Statement requires the classification and disclosure of extraordinary and prior perioditems, and
the disclosure of certain items within profit or loss from ordinary activities. It also specifies the
accounting treatment for changes in accounting estimates and the disclosures to be made in the
financial statements regardingchanges in accounting policies.

AS 6 Depreciation Accounting (Originally Issued in November, 1982, Commencing &

st
Mandatory from 1 April, 1995)

The depreciable amount of a depreciable asset should be allocated on a systematic

basis to each accounting period during the useful life of the asset. The depreciation method
selected should be applied consistently from period to period. A change from one method of
providing depreciation to another should be made only if the adoption of the new method is
required by statute or for compliance with an accounting standard or if it is considered that the
change would result in a more appropriate preparation or presentation of the financial statements
of the enterprise. Depreciation is a measure of the wearing out, consumption or other loss of
value of a depreciable asset arising from use, of time or obsolescence through technology and
market changes. Depreciation is allocated so as to charge a fair proportion of the depreciable
amount in each accounting period during the expected useful life of the asset. Depreciation
includes of assets whose useful life is predetermined.

Depreciable assets are assets which

(i) Are expected to be used during more than one accounting period; and

(ii) Have a limited useful life; and

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(iii) Are held by an enterprise for use in the production or supply of goods and services, for
rental to others, or for administrative purposes and not for the purpose of sale in the ordinary
course of business.

Useful life is either (i) the period over which a depreciable asset is expected to be used by the
enterprise; or (ii) the number of production or similar units expected to be obtained from the use
of the asset by the enterprise. Depreciable amount of a depreciable asset is its historical cost, or
other amount substituted for historical cost in the financial statements, less the estimated residual
value.

AS 7 Construction Contracts: (Originally Issued in December, 1983, Commencement &

st
Mandatory from 1 April, 2003)

The objective of this Statement is to prescribe the accounting treatment of revenue and
costs associated with construction contracts. Because of the nature of the activity undertaken in
construction contracts, the date at which the contract activity is entered into and the date when
the activity is completed usually fall into different accounting periods. Therefore, the primary
issue in accounting for construction contracts is the allocation of contract revenue and contract
costs to the accounting periods in which construction work is performed. This Statement uses the
recognition criteria established in the Framework for the Preparation and Presentation of
Financial Statements to determine when contract revenue and contract costs should be
recognized as revenue and expenses in the statement of profit and loss. It also provides practical
guidance on the application of these criteria. A construction contract is a contract specifically
negotiated for the construction of an asset or a combination of assets that are closely interrelated
or interdependent in terms of their design, technology and function or their ultimate purpose or
use.
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CHAPTER 3

INDUSTRY PROFILE

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Chapter-3

INDUSTRY PROFILE

Overview

Telecommunication occurs when the exchange of information between two or

moentities (communication) includes the use of technology. Communication technologyuses
channels to transmit information (as electrical signals), either over a physical medium (such as
signal cables), or in the form of electromagnetic waves. The word is often used in its plural form,
telecommunications, because it involves many different technologies.

communicating over a distance included visual signals, such as beacons, smoke signals,
semaphore telegraphs, signal flags, and optical heliographs.[7] Other examples of pre-
modern long-distance communication included audio messages such as coded drumbeats, lung-
blown horns, and loud whistles. Modern technologies for long-distance communication usually
involve electrical and electromagnetic technologies, such as telegraph, telephone, and tele-
printer, networks, radio, microwave transmission, fiber optics, and communications.

A revolution in wireless communication began in the first decade of the 20th century
with the pioneering developments in radio communications by Guglielmo Marconi, who won
the Nobel Prize in Physics in 1909. Other highly notable pioneering inventors and developers in
the field of electrical and electronic telecommunications include Charles Wheatstone and Samuel
Morse (telegraph),Alexander Graham Bell (telephone), Edwin Armstrong, and Lee de Forest
(radio), as well as Vladimir K.

HISTORY OF TELECOMMUNICATIONS
India is the worlds fastest growing industry in the world in terms of number of
wireless connections after China, with 811.59 million mobile phone subscribers. According to
the world telecommunications industry, India will have 1.200 billion mobile subscribers by 2013.
Furthermore, projections by several leading global consultancies indicate that the total number of
subscribers in India will exceed the total subscriber count in the China by 2013.
So how Telecommunication started in India??
Well Postal means of communication was the only mean communication until the year
1850. In 1850 experimental electric telegraph started for first time in India between Calcutta
(Kolkata) and Diamond Harbor (southern suburbs of Kolkata, on the banks of the Hooghly
River). In 1851, it was opened for the use of the British East India Company. Subsequently
construction of telegraph started throughout India. A separate department was opened to the
public in 1854. Dr.William OShaughnessy, who pioneered the telegraph and telephone in India,
belonged to the Public Works Department, and worked towards the development of telecom.
Calcutta or the-then Kolkata was chosen as it was the capital of British India.
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 So who was looking after Telecom??
In the year 1975 Department of Telecom (DOT) was responsible for telecom
services in entire country after separation from Indian Post & Telecommunication. Decade
later Mahan agar Telephone Nigam Limited (MTNL) was chipped out of DOT to run the
telecom services of Delhi and Mumbai. In 1990s the telecom sector was opened up by the
Government for private investment. In1995 TRAI (Telecom Regulatory Authority of India)
was setup. This reduced the interference of Government in deciding tariffs and policy
making. The Government of India corporatized the operations wing of DoT in 2000 and
renamed Department of Telecom as Bharat Sanchar Nigam Limited (BSNL).

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CHAPTER 4

COMPANY PROFILE

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Chapter-4
COMPANY PROFILE

Bharat Sanchar Nigam Limited

Type State-owned enterprise

Industry Telecommunications

Founded 1 October 2000

Headquarters New Delhi, India

Key people Anupam Shrivastava (Chairman & MD)

Services Fixed line and mobile telephony,

Revenue 279 billion (US$4.1 billion) (2014)[1]

Net income -70.19 billion (US$1.0 billion) (2014)[1]

Total assets 893 billion (US$13 billion) (2014)[1]

Owner Government of India

Members 93.29 million[2] (June 2015)

Number of employees 216,925 (2015)

Website www.bsnl.in

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Introduction

Bharat Sanchar Nigam Limited (abbreviated BSNL) is an Indian state-owned

telecommunications company headquartered in New Delhi, India. It was incorporated on 15
September 2000. It took over the business of providing of telecom services and network
management from the erstwhile Central Government Departments of Telecom Services (DTS)
and Telecom Operations (DTO), with effect from 1 October 2000 on going concern basis. It is
the largest provider of fixed telephony and fourth largest mobile telephony provider in India, and
is also a provider in India, and is also a provider of broadband services. However, in recent years
the companys revenue and market share plunged into heavy losses due to intense competition in
the Indian telecommunications sector.

VISION, MISSION & OBJECTIVES:

Vision: To become the leading telecom service provider in India with global presence.

To create a customer focused organization with excellence in customer care, sales and
marketing.

Leverage technology to provide affordable and innovative telecom services/products across

customer segments.

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Mission:

Be the leading telecom service provider in India with global presence.

Generating value for all stakeholders- employees, shareholders, vendors &

business associates
Maximizing return on existing assets with sustained focus on profitability
Becoming the most trusted, preferred and admired telecom brand
To explore International markets for Global presence

Creating a customer focused organization with excellence in customer care, sales & marketing

Developing a marketing and sales culture that is responsive to customer needs care, sales
& marketing.
Excellence in customer service- friendly, reliable, time bound, convenient and courteous
service
Leveraging technology to provide affordable and innovative products/ services across
customer segments.
Offering differentiated products/services tailored to different service segments
Providing reliable telecom services that are value for money
Providing a conducive work environment with strong focus on performance

Attracting talent and keeping them motivated

Enhancing employees skills and utilizing them effectively
Encouraging and rewarding individual and team/group performance
Establishing efficient business processes enabled by IT
Changing policies and processes to enable transparent, quick and efficient decision
making
Building effective IT systems and tools

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 Objectives:

To be the leading Telecom Services provider by achieving higher rate of growth so as to

become a profitable enterprise.
To provide quality and reliable fixed telecom service to our customer and thereby
increase customers confidence.
To provide customer friendly mobile telephone service of high quality and play a leading
role as GSM operator in its area of operation.
Strategy for:
Rightsizing the manpower
Providing greater customer satisfaction>/1i>
Contribute towards:

Broadband customers base of 20MN in India by the end of 2011-12 as per broadband
policy 2004.
Providing telephone connections in villages as per Government policy.
Leveraging the existing infrastructure of BSNL for facilitating implementation of other
government programs and initiatives particularly in the rural areas.

Board of Directors

The Board comprise of 12 Directors, of which 5 [including the CMD] are whole time
Directors and 2 Government Nominee Directors. The present composition is as under

Chairman & Managing Director- Shri Anupam Shrivastava

Director - Consumer Fixed Access(CFA)- Shri N.K.Gupta
Director - (Enterprise) - Shri N.K.Mehta
Director - (CM) - Shri R.K.Mittal
Director - (HRD) & (Fin)- Smt. Sujata Ray
Govt. Director- Shri N.SIVASAILAM
Govt. Director- Smt. Padma Iyer Kaul
Non Official Independent Director- Smt. Kanuru Sujatha Rao
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 Non Official Independent Director- Dr. Santosh R.Dastane

Main services being provided by BSNL

BSNL provides almost every telecom service in India. Following are the main telecom
services provided by BSNL

Optical Infrastructure and DWDM: BSNL owns the biggest OFC network in India.
Also the DWDM network is one of the biggest in the world. The DWDM
equipments purchased in open tender at BSNL are mainly of united Telecoms
Limited (UTL) make, which was declared lowest cost in competitive bidding. Rest
DWDM equipments are from Huawei. The SDH equipments are mainly from
Huawei, ZTE, and ECI, UT STAR etc.
Market share: As of 30 November 2013, BSNL had 12.0% market share in India and
th
stands as 5 Telecom operator in India and 67% market share in ADSL services.

Mangaged Netwfork Sergvices: BSNL is provriding comvplete Telebcom Senrvices

solubtion to the Entenrprise Custokmers i.e. MPLS connectimvity, poi nt to point lea
sed li nes and Intemrnet lease Lines.
Unimversal Tmelecom Servi ces: Fixed wire line serv ices and land line in lo cal loop
(WLL) using CDMA tech nology called bfone and Taran d respect tively. As of 30
June 2010, BSNL and 75% market share of fixed lines.
Cellu lar M obile telep hone Ser vices: BSNL is maj or prov ider of Cellu mlar Mo
bile Telep hone Se rvices usin g GSM platfo rm u nder the bra nd name cell one &
Excel (BSNL Mobile). As of 30 June 2010 BSNL has 13.50% share of m obile telep
hony in the country. It has 95.54 mi llion cu stomers usi ng BSNL mobile.
WILL-CDMA Telep hone Ser vices: BSNLs WILL (wireless in Local Loop) serv ice
is a gi ving bo th fixe d line telep hony & m obile teleph ony.

Challenges
However, despite impressive growth shown by BSNL in recent times, the fixed line customers
BSNL has brought down long distance calling rate under One India Plan, however, the success of
the scheme is not known and BSNL faces bleak fiscal 2009-2010 as users flee. Presently there is
an intense competition in Indian Telecom sector and various Telecoms are rolling our attractive
schemes and are providing good customer services. But situation as on 2012, BSNL will be third
largest operator (service) and No 1 access operator in the country. As per the TRAI Report 2011-
12, BSNL became the most trustworthy brand due to its loyalty towards customers and its rule.

Broadband services: The shift in demand from voice to data has revolutionized the very
nature of the network. BSNL is poised to cash on this opportunity and has planned for extensive
expansion of the Broadband services. The Broadband customer base of 3.56 million customers in
March2009 is planned to be increased to 16.00 million by March 2014.on 13 June 2012, BSNL
employees participated called off an earlier planned nationwide strike against discriminatory
policies of BSNL management upon promise by Management to resolve the Demands of the
protesting unions.

3G coverage
BSNL paid the Indian government Rs. 101.87 billion for 3G spectrum coverage. As of
2011, BSNL offers coverage in over 800 cities across India BSNL launched in 2012 a 3G
wireless pocket router named Winknet Mf50. It was released in collaboration with Shyam
Networks, Winknet Mf50 enables the connection of multiple devices to the Internet using a
single sim card.

Recognitions

th
The Brand Trust Report published by Trust Research Advisory ranked BSNL in the 65 position
of the list of Most Trusted brands.

Competitors

BSNL competes with 10 other mobile operators throughout India. They are Airtel, Aircel,
Idea, MTNL, MTS, Reliance Communications, Tata DoCoMo, Videcon, Vrigin Mobile and
Vidafone.

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Quality of service

BSNL goes by the motto Connecting India, fast and displays the same at their
homepage. BSNL offers seamless coverage in almost all urban and rural areas of India.

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CHAPTER 5

DATA INTERPRETATION

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Chapter-5
DATA INTERPRETATION
Application of accounting policies:

AS-1: Disclosure of Accounting Policies

1. Bharat Sanchar Nigam Limited(the Company or BSNL) is a Public Sector

Company fully owned by the Government of India and was formed on 15 September
2000 in pursuance to the Telecom Policy 1999, to take over the ongoing business of the
Department of Telecom Services (DTS) and Department of Telecom Operations (DTO)
from 1 October 2000. The Company has been incorporated under the erstwhile
Companies Act, 1956 with its registered corporate office in New Delhi. So it is
mandatory for BSNL to disclose their accounting policies.
2. The selection and application of accounting policies in BSNL are based on the principles
of prudence, substance over form and materiality.
3. The accounting policies adopted by BSNL are disclosed in the annual report under
Summary of significant accounting policies and other explanatory information as per
the guidelines under AS-1
4. BSNL has adopted numerous accounting policies over the years and if the existing
policies are found to be redundant or not fairly presenting its performance, then changes
in the accounting policies, governed by the statute have been employed. Following this,
all the necessary changes in the present and past years declarations have been made and
the same has been disclosed in the next years Annual Report.

AS-2: Valuation of Inventories

1. In BSNL, Inventories are valued at cost or net realisable value, wherever available, as
the case may be:
The cost is ascertained generally on weighted average method
Obsolete and/ or non-moving inventories are valued at net realisable value
and written-down every year.

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 These inventories do not include:
Work-in-progress arising under construction contracts, including directly related
service contracts
Shares, debentures held as stock-in-trade
2. The cost at which it is valued excludes:
Abnormal amounts of waste materials, labour etc.,
Storage costs, unless these costs are necessary in the production process prior
to further production stage
Overheads, that do not contribute to bringing inventories to their present
location and condition
Selling and distribution cost
(All amounts in Rs. lakh)
Year Inventories
2012 359678
2013 377209
2014 354728
2015 369688
2016 443371

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 500,000

450,000

400,000

350,000

300,000

250,000

200,000

150,000

100,000

50,000

0
2012 2013 2014 2015 2016

AS-3: Cash flow statements

1. Components of cash and cash equivalents are disclosed in the cash flow statement and the
same are reported in balance sheet.
2. Non-cash transactions that do not require the use of cash equivalents are excluded from
cash flow statement
3. Foreign currency cash flows:

Transactions in foreign currency are recorded in the reporting currency, by applying

to the foreign currency amount the exchange rate prevailing on the date of the
transaction i.e. on the date of payment or the billing as the case may be.

4. Extraordinary items:
Cash flows arising from these are classified as operating, financing and investing and
disclosed separately.

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 Interest and dividend are disclosed separately
Taxes on income are disclosed separately
Investments in associates, joint ventures and itself are disclosed separately
Acquisitions and disposals of the business units are disclosed separately under
financing activities
(All amounts in Rs. lakh)
Year Operating Investing Financing
2012 82028 273087 130486
2013 63543 243822 108166
2014 165145 284823 95998
2015 60023 244865 214246
2016 101242 215746 95598

300,000

250,000

200,000

Operating
150,000
Investing
Financing
100,000

50,000

0
2012 2013 2014 2015 2016

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AS-4: Contingencies and events occurring after the balance sheet date

1. Accounting treatment of contingent laws:

They are reported by prudence principle
Liabilities, though contingent, are provided for if there are reasonable chances of
maturing such liabilities as per management. Other contingent liabilities, barring
frivolous claims, not acknowledged as debts, are disclosed by way of notes
2. Contingent gains are not recognized in financial statements

AS-5: Net profit/loss for the period, prior period items and changes in
accounting policies

1. Profit and loss:

(All amounts in Rs. lakh)
Year Profit
2012 -885070
2013 -788444
2014 -701976
2015 -823409
2016 -387992

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 0
2012 2013 2014 2015 2016
-100000

-200000

-300000

-400000

-500000 Profit

-600000

-700000

-800000

-900000

-1000000

2. Prior period items:

Items of income or expenditure, exceeding Rs.5 lakh, are considered for being
treated as prior period items.
They are separately disclosed in P and L statement
(All amounts in Rs. lakh)
Year Prior period items
2012 -16832
2013 -18282
2014 -19094
2015 -19652
2016 -34529

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 0
2012 2013 2014 2015 2016
-5,000

-10,000

-15,000

-20,000 Prior period items

-25,000

-30,000

-35,000

-40,000

3. The effect of the accounting estimate in determination of net profit/loss is included in

both current and future periods.

AS-6: Depreciation accounting

1. Depreciation on fixed assets has been provided as per guidance set out in Schedule II
of the Companies Act, 2013 on written down value method
2. Assets costing up to Rs. 5,000 are depreciated fully in the year of purchase. Similarly,
partition works and paintings costing up to Rs. 200,000 are depreciated fully in the
year of construction/ acquisition.
3. The depreciation on machinery and tools used both for project and maintenance work is
charged to statement of profit and loss instead of capitalization.
4. All telephone exchange buildings, administrative offices and captive consumption
assembling premises/workshops are considered as building (other than factory building).
Accordingly, depreciation is charged uniformly
5. If the asset is revalued, the provision for depreciation is on revalued amount

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AS-7: Construction Contracts

1. BSNL is a service-oriented company, which offers Telecom services. But, construction

of cellphone towers and office buildings etc., take place. But all of these are considered to
be support activities to generate revenue for the Company, by providing the services. So
these constructions do not fall under the core operations of the Company.
2. BSNL is not involved in any construction contracts with regard to any of its major
operations.

AS-8: Accounting for Research and development

1. The costs related to Research and Development are recorded as expenses in Profit
and loss statement.
2. If there is an indication that the current and future development costs and production,
selling and distribution costs are likely to be more than covered, then they can deferred
and separately disclosed in Balance sheet under Miscellaneous expenditure

AS-9: Revenue recognition

Income from services is accounted for on accrual basis and in conformity with the notified
Accounting Standard- 9 on Revenue Recognition. Accordingly,

1. Revenue for all services is recognized when earned and are realizable at the time of
billing. Un-billed revenues from the billing date to the end of the year are recorded as

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 accrued revenue during the period in which the services are provided. Provisions are
made for debts outstanding for more than two years and for debts less than two years
which are considered doubtful (based on management decision), to the extent considered
necessary by the management.
2. Installation charges received from subscribers at the time of new telephone connections
are recognized as income in the first year of the billing.
3. In terms of the arrangement between Department of Telecommunications (DoT) and the
Company, the charges for telecommunication services and other infrastructural services
provided by BSNL to DoT are neither billed nor accounted for.
4. Sale proceeds of scrap arising from maintenance and project works are taken into
miscellaneous income in the year of sale.

Year Revenue from Other income

operations
2012 2598213 195137
2013 2565481 147308
2014 2615326 2615326
2015 2724223 140297
2016 2844942 446928

3,000,000

2,500,000

2,000,000

1,500,000 Revenue from operations

Other Income
1,000,000

500,000

0
2012 2013 2014 2015 2016
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AS-10: Accounting for property, plant and equipment

1. Fixed assets are carried at cost less depreciation. Cost includes directly related
establishment and other expenses including employee remuneration and benefits,
directly identifiable to the construction or creation of the assets.
2. Expenditure on replacement of assets, equipment, instruments and rehabilitation works is
capitalized if, in the opinion of the management, it results in enhancement of revenue
generating capacity.
3. Assets are capitalized to the extent completion certificates have been obtained,
wherever applicable.
4. The cost of stores and materials at the time of issue to a project is debited to
Capital Work In Progress (CWIP).

(All amounts in Rs. lakh)

Year Fixed assets
2012 7753915
2013 7133265
2014 5449945
2015 5661272
2016 5048257

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 9,000,000

8,000,000

7,000,000

6,000,000

5,000,000
Fixed assets
4,000,000

3,000,000

2,000,000

1,000,000

0
2012 2013 2014 2015 2016

AS-11: Accounting for effects of changes in Foreign Exchange Rate:

1. Transactions in foreign currency are recorded in the reporting currency, by applying

to the foreign currency amount the exchange rate prevailing on the date of the
transaction i.e. on the date of payment or the billing as the case may be.
2. All monetary items are stated at the exchange rate prevailing as at reporting date and
the difference taken to statement of profit and loss as exchange fluctuation loss or gain.

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AS-12: Accounting for Government grants

Deferred Government grand:

(All amounts in Rs. lakh)

As at 31 March 2016 As at 31 March 2015

Grant in aid 24,533 28,497

24,533 28,497

1. Since 2005-06, an amount of ` 61,332 lakh (` 17,000 lakh for wireline and ` 44,332 lakh
for wireless services) has been received from Department of Information Technology (DIT)
for providing wireline and wireless connectivity to 41,500 common service centres. Since
this grant cannot be linked to creation of any particular asset; as telecom network is a
seamless entity, the same is being disclosed under Grant in aid as a
Deferred Grant in accordance with the notified Accounting Standard-12 on Accounting
for Government Grants
2. It is being written back in the statement of profit and loss in a systematic and
rational basis

AS-13: Accounting for investments

1. Long-term investments are carried at cost, after providing for any diminution in value, if
such diminution is other than temporary.
2. Current investments are carried in balance sheet at lower of cost or fair value
3. Any disposals of current or long-term investments are separately disclosed
101 | P a g e
AS-14: Accounting for amalgamation

BSNL is in talks with MTNL for its merger with BSNL. But it is yet to be approved by
the Board of Directors. If the merger takes place in future, then BSNL has to comply with
this accounting standard also.

AS-15: Accounting for retirement benefits

Short term employee benefits:

Short term employee benefits are recognized in the statement of profit and loss in the
period during which the services have been rendered.

Long term employee benefits:

Defined contribution plan:

1. Pension Contribution (including gratuity)-

The employees of DoT who have opted for absorption / absorbed in the Company and
the employees on deemed deputation from Government are eligible for pension, which is
a defined contribution plan. The Company makes monthly contribution (including
liability on account of gratuity) at the applicable rates as per Government Pension Rules,
1972 and Fundamental Rules and Supplementary Rules (FR & SR), to the Government
who administers the same.

2. Employees Provident Fund-

All directly recruited employees of the Company are entitled to receive benefits under
the provident fund, a defined contribution plan. Both employee and employer make
monthly contribution to the plan at a predetermined rate of employees basic salary and
dearness
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 allowance. These contributions to provident fund are administered by the provident fund
commissioner. Employers Contribution to provident fund is expensed in the Statement
of Profit and Loss.

Defined benefit plan:

4. Leave encashment-

The liability on account of un-availed leave in respect of absorbed employees and

directly recruited employees at the year-end is provided for based on actuarial valuation.

AS-16: Borrowing costs

1. Borrowing costs directly attributable to acquisition, construction and production of

qualifying asset are capitalized as part of cost of the asset

Qualifying asset:

It is an asset that necessarily takes a substantial period of time to get ready for
intended use or sale

2. Other borrowing costs are recognised as expense in the period they are incurred

(All amounts in Rs. lakh)

For the year ended 31 For the year ended 31
March 2016 March 2015
Interest expense on:
Subscribers deposit 18 8
Bank Loan 53,896 49,536
Others 425 346
Other borrowing costs - 299
54,339 50,189
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AS-17: Segment reporting

Primary Segment: Basic, Cellular and Broad Band services have been considered as primary
business segments for reporting under the notified AS-17 Segment Reporting issued by CA
Rules 2006.

Secondary Segment: The Company caters only to the Indian market representing a
singular economic environment with similar risks and returns and further there are no
reportable geographical segments.
The manufacturing activities have not been treated as a separate segment since such activities
are essentially carried on as support service to other segments mainly for captive consumption.
The following specific accounting policies have been followed for segment reporting

1. Segment revenue includes service income and other income directly identifiable
with/allocable to the segment.
2. Income/expense, which relates to the Company, as a whole and not allocable to
individual business segment is included in Un-allocable income/expense respectively.

AS-18: Related party disclosures

1. The advances take place only in the normal course of business.

2. The Company being a wholly State owned enterprise, disclosure as regards related party
relationship with other State controlled enterprises and transactions with such
enterprises has not been made as per the AS-18 Related party disclosures.

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AS-19: Leases

1. The Company has taken vehicles for senior executives under operating leases, which
expire between the period ranging from April 2015 to November 2019 (previous year
April 2014 to May 2018).
2. The committed lease rentals in the future, under non-cancellable operating leases are
disclosed and are as follows:

(All amounts in Rs. lakh)

Particulars For the year ended For the year ended
31 March 2016 31 March 2015

Not later than one year 57 66

(excluding service tax)

Later than one year and not 105 153

later than five years
(excluding service tax)
Total 162 219

AS-20: Earnings Per Share (EPS)

1. The nominal value of shares along with the EPS figures are disclosed
2. Earnings Per Share (EPS) is calculated by dividing net profit or loss for the year
attributable to shareholders by the weighted average of shares outstanding during
the year.
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AS-21: Consolidated Financial Statements

1. BSNL is a Public Sector Company fully owned by the Government of India, and it does
not have any subsidiaries
2. But if BSNL decides to have subsidiaries in future, then it should comply with AS-21
and should disclose the consolidated financial statements along with standalone financial
statements.

AS-22: Accounting for Taxes on Income

1. Taxes on income for the current period are determined on the basis of taxable income and
tax credits computed in accordance with the provisions of the Income Tax Act, 1961.
2. In accordance with the notified Accounting Standard-22, Accounting for taxes on
income, Deferred Tax is recognized on the timing differences between accounting
income and the taxable income for the period and quantified using the tax rates in
force or substantively enacted as on the reporting date.
3. Deferred Tax Assets are recognized and carried forward to the extent there is a virtual
certainty that such deferred tax assets can be realized.

AS-23: Accounting for investments in associates in consolidated financial

statements

BSNL is a Public Sector Company fully owned by the Government of India and it does
not have any investments in associates. So it need not comply with AS-23 and disclose any
consolidated financial statements of its associates.

AS-24: Discontinuing operations

BSNL has several loss making units. But it has not discontinued the operations of these
units. If it considers discontinuing operations in any of its units, then it should follow all the
 regulations as per AS-24, for the completion of this process and for disclosing the same in its
annual report.

AS-25: Interim financial reporting

BSNL reports its financial performance once a year. So AS-25 does not hold good in case of
this company.

AS-26: Intangible Assets

1. Intangible assets are stated at cost of acquiring the same less accumulated amortization.
2. Intangible assets are recognized if it is probable that the future economic benefits
attributable to the assets will flow to the enterprise and cost of the asset can be measured
reliably in accordance with the notified Accounting Standard 26 on Intangible Assets.

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AS-27: Financial reporting of interests in Joint Ventures

BSNL is a Public Sector Company fully owned by the Government of India and it has not
ventured with any public or private companies. But we cannot overrule the possibility of a
PPP model in future. If it happens so, then BSNL should comply with AS-27 as well, along
with the other accounting standards.

AS-28: Impairment of Assets

1. Assets, which are impaired by disuse, damage or obsolescence, are segregated from
the concerned assets category and shown as Decommissioned Assets.
2. Provision is made for the loss, if any, due to the difference between their net carrying cost
and the net realizable value.

AS-29: Provisions, contingent liabilities and contingent assets

1. Provisions are recognized when the Company has a present obligation as a result of past
events; it is more likely than not that an outflow of resources will be required to settle the
obligation, and the amount has been reliably estimated.
Example:
Long term provisions
(All amounts in Rs. lakh)
As at 31 March 2016 As at 31 March 2015
Provision for employee
benefits
Post retirement benefit of - 28,438
serving
Employees
(net of planned - 28,438
investments)

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 Short term provisions:

(All amounts in Rs. lakh)

As at 31 March 2016 As at 31 March 2015
Provision for employee
benefits :
Leave encashment of retired 4,350 3,495
employees

Gratuity 4,471 1,497

Post retirement benefit of 18,862 58,603

serving
employees
Provision for others :

Wealth tax 312 385

27,995 63,980

2. Contingent liabilities are provided for if there are reasonable chances of maturing such
liabilities as per management. Other contingent liabilities, barring frivolous claims,
not acknowledged as debts, are disclosed by way of notes
3. Contingent gains are not recognized in financial statements

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CHAPTER 6

FINDINGS AND SUGGESTIONS

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Chapter-6
FINDINGS AND SUGGESTIONS
FINDINGS

Telecom sector is highly capital intensive and require a high initial investment.45 to 50
percent cash out flow of BSNL is on material like maintenance stores ,consumable loose
Tools and assets values charged to revenue.

Bsnl offered some attractive plans only for big player of the market, which purchases the
products in bulk so that small retailer of the market suffered from lack of demand and
other problems.

Revenue services in installation charges recovered from subscribers at the time new
telephone connections.

The charges for the telecommunication services and other infra structural services
provided by BSNL,so that small reatailer of the market suffer from lack of demand

112 | P a g e
SUGGESTIUONS

Public authorities overseeing the International Financial Reporting Standards (IFRS)
Foundation, through the Monitoring Board in place since early 2009, should encourage
the Foundation to make itself more directly accountable to the global investment
community.

The Monitoring Board should re-examine its own role, composition and processes in the
same spirit, one option being its enlargement to include investor representatives, and
transformation into a statutory body of the IFRS Foundation.

The IFRS Foundations funding framework should be better aligned with its governance
and accountability arrangements.

This Policy Contribution is an adaptation of a letter sent on 12 April 2011 from the
author to the Monitoring Board of the IFRS Foundation, whose members are public
authorities including the European Commission, as a response to the public consultation
on theMonitoring Boards Consultative Report on the review of the IFRS Foundations
governance.

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CHAPTER 7

CONCLUSION

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Chapter-7
CONCLUSION
India is slowly entering the arena of accounting standards. But the progress of
formulation of accounting standards has been very slow compared with the developments at
international levels.

Bringing about harmonization in accounting practices among countries throughout the

world is indeed a very formidable task. The vision of a harmonized accounting world may
inspire many minds but in the practical field it is hard to go about embracing a situation where
accounting principles and procedures are perfectly harmonized among countries throughout the
world.

The development of harmonized accounting rules and a uniformity of approach among

countries towards education and training of professional accountants should accompany
principles. Furthermore, the harmonization of accounting rules and principles among countries
should also be accompanied by inter country harmonization in auditing principles and standards.
Harmonization initiatives are now working much more effectively than ever before. Many of the
initial hurdles have been overcome and much progress towards harmonizing accounting
principles and procedures among countries has already been achieved. Differences are still there
but they are narrowing. It is expected that the pace of progress in the sphere of harmonization
will accelerate further in the coming years.

The following observations are made:

1. BSNL has disclosed financial particulars by following companys act 1956 guidelines. It is found

that some Accounting policies were partially followed by BSNL. This is because some circles

were not following uniform method such as depreciation of assets.

2. BSNL has not paid any income tax because of constant losses during last five years.
116 | P a g e
CHAPTER 8

BIBLIOGRAPHY

117 | P a g e
Chapter-8
BIBLIOGRAPHY
Books:

1. The Complete guide to International Financial Reporting standards(Including ia and

interpretation) by Ralph Tiffin 2nd Edition.
2. How to comply with Accounting Standards by Agarwals 2002.
3. Chunawala S.A., Financial Management, Himalaya Publishing House, Second Edition
2008

Magazines & Publications:

1. Economics and Business Facts for you (Jan 2009)
2. India page of HT paper (Dec. 27,2009)
3. The Business world (Feb 2009)

Websites:
www.dotgov.in
www.traigov.in
www.tdsat.gov.in
www.bsnl.co.in

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CHAPTER 9

GLOSSARY

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Chapter-9
GLOSSARY
M&As- Mergers and Acquisitions

VoIP- Voice over Internet Protocol

DOT- Department of telecommunications

VAS- Value added services

TRAI- Telecom Regulatory Authority of India

DTH services- Direct to home services

NTP- National Telecom policy

MTNL- Mahanagar Telephone Nigam Limited

HUTCHISON- ESSAR- Vodafone

VSNL- Videsh Sanchar Nigam Limited

PTT- Post Telephone and Telegraph

CAGR- Compound Annual Growth Rate

GSM Global System for Mobile

GPRS- General Packet Ration Service

CDMA- Code Division Multiple Access

Pop- point of Presence

ONA- Open Network Architecture

Teledensity- Number of telephone connections for every hundred individuals living within an
area

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ICOR- Incremental Capital Output Ratio

IPTU- Internet Protocol Television

DTO- Department of Telecom Operations

DTS- Department of Telecom Services

Telephony- use of telephone

WLL- Working Lord Limit ICT- Information and

Communication Technology MPLS- Multi

protocol label switching VPN- Virtual private

Networks

VSAT- Very Small Aperture Terminals

FTTH- Fiber to the home

Number Uno- The best/most important thing

OFC- Optical Fiber Communications

DWDM- Dense Wavelength Division Multiplexing (optical multiplexing technology used to

increase bandwidth over existing fiber networks)

ADSL- Asymmetric Digital Subscriber Line

Dupont Modal- Method of assessing a companys return on equity

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CHAPTER 10

ANNEXURE

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Chapter-10
ANNEXURE

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